IRS Increases Mileage Rate to 55.5 Cents per Mile

 

June 23, 2011

This article was just published on the IRS Newswire Issue Number: IR-2011-69

WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.
In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

“This year’s increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices,” said IRS Commissioner Doug Shulman. “We are taking this step so the reimbursement rate will be fair to taxpayers.”

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

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Federal Unemployment Tax Rate decreases at the End of June 2011

As reported by AICPA Tax Alert/Tax Section News 5/27/11FUTA Surtax Expires at the End of June
 
Originally enacted by Congress in 1976, the temporary surtax on the Federal unemployment tax was imposed to assist states in rebuilding their unemployment trust funds. That was 35 years ago and the temporary surtax has been renewed each time expiration date drew near. The last renewal was in 2009, when the Worker, Homeownership, and Business Assistance Act was signed into law.The Federal Unemployment Tax rate is 6.2% of the first $7,000 of wages paid by an employer. The .2% is a surtax that is the equivalent of an added tax of $14 per year per employee. When Congress first enacted the surtax, it also requested that Congress?? seek a more permanent solution to the long-term funding of the Federal Unemployment Tax system that would leave it in a better position to deal with economic swings that resulted in greater demands on the unemployment funds.

The temporary surtax expires on June 30, 2011.  While the President’s budget proposal includes an extension of the surtax, no legislation has been seriously discussed and barring other action, the FUTA tax will be lowered to 6% on July 1.

For details on FUTA, see the instructions to IRS Form 940, filed by all employers each year.
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